Madrid Embassy files, lot 58 F 57, “320—U.S.–Spain”

No. 836
William B. Dunham of the Office of Western European Affairs to the Counselor of Embassy in Spain (Jones)

top secret

Dear Johnny : This is a letter which I hope will bring you up to date regarding the current status of plans for economic and military negotiations and our thinking with respect to some of the points that have not yet been resolved.

I think we can cover the necessary ground with respect to economic assistance by answering your letter of January 9.1 I feel that substantial agreement has been reached in Washington with respect to the underlying purpose of economic assistance. I would like to stress, however, that this agreement is in some instances only at the working level and, it is in any case, only tentative. It is generally agreed, I think, that as you wrote in your letter of January 9, the U.S. Government should be ready to move ahead with negotiations regarding economic aid at the same time we carry on military negotiations. However, I think that the biggest difference between the views you expressed, and the views that are jelling in Washington, is in respect to the objective to be served by economic aid. The thinking here is that economic assistance will be used to support the military program in Spain—whatever that turns out to be. It will be directed toward this objective and not toward a general rehabilitation of the Spanish economy. I realize that to some extent the same projects in Spain would receive U.S. assistance, whether the objective was support for U.S. military plans or economic recovery in general. But it cannot be emphasized too much that the present tendency is to make a very clear differentiation between the two basic principles involved. (This is so much for your own information that I think it would be well for you to restrict circulation of this letter in order to guarantee that its contents will not pass to the Spaniards because, among other reasons, this is only an indication of thinking here and is not a formally agreed position). It seems likely that a sum of the magnitude of $4 or $5 million dollars may be set aside for consumer goods on the theory that it would be prudent in terms of public relations, and that it might be useful as a counter against a possible inflationary effect from our military program. In this connection, both we and the MSA, at the working level, are inclined to discount, somewhat, Professor [Page 1794] Sufrin’s estimate2 of the magnitude of the inflationary effect. All this is quite hypothetical, however, until the details of the military spending are known. To date we have not received them from the Pentagon, though they are promised.3

We still think that negotiations for economic assistance should not precede military negotiations, since, in the first place, we cannot plan the support for a military program until that program is defined. Secondly, the amount of the $100 million dollars available for economic assistance has not been determined. Thirdly, because we still lean, to some extent, toward the idea of using the promise of economic assistance as a carrot to attain our military objectives. But I hasten to add that this is a subsidiary consideration and one which weighs relatively lightly in our thinking at this time.

It is conceivable that there may be very little of the $100 million dollars for economic assistance because it appears that Defense has no budgetary provisions, either in fiscal 1952 or 1953, for an expanded military program in Spain. This is hard to believe, I know, but it seems to be a fact. It is not yet clear whether they can transfer funds earmarked for other purposes, but at this moment the prospects do not seem to be good. The idea has been advanced that the $100 million dollars might be used for economic assistance and that the counterpart might then be used for the construction costs and other peseta requirements of our military program.

To a considerable extent the present attitude in Washington regarding the timing of economic assistance does not bear out the apprehension expressed in the third paragraph of your letter, that the Department was losing control of the situation. I think the attached memorandum from Bissell to Harriman indicates that the MSA seems quite determined to stick by the position I have outlined.4

There is complete agreement at the pick and shovel level in the State Department and the MSA about the desirability of following through on the technical assistance provision of the $100 million dollar legislation. We all think that this is one of the soundest and most worthwhile investments that the U.S. could make in Spain. While we have not yet reached the point of drawing up a tentative U.S. list of proposed technical assistance projects, we have all agreed that agriculture is certainly one of the fields to be covered. [Page 1795] We would welcome any views that the Embassy has in this or any other respect.

I realize that the Spaniards may be expecting much more in the way of economic assistance than may ultimately be available. If they have convinced themselves that the $100 million dollars is a minimum, rather than a maximum figure, I can only point to the series of telegrams which have been addressed to this subject over the past six months or so. We have tried at this end to head off exaggerated hopes of U.S. assistance. If it does not come through in the magnitude expected, they will just have to live with the problems which, to a considerable extent, the Spanish Government has created or fomented.

Our present thinking here is that a bilateral agreement would be negotiated to cover economic assistance. We have been working with MSA on the basis of our January 8, 1952 bilateral with the Yugoslavs.5 As soon as we have a copy of this very tentative first draft, I will send it along for your comments and consideration.

Turning now to the question of our military plans, I have enclosed two memoranda which I think should bring you relatively up to date with what has happened, and what our thinking is. The first contains a summary of the tentative Defense recommendations.6 I stress the word “tentative” because Foster stated in his covering letter7 that the Defense position would not be ultimately defined until they had the State Department views and had considered the matter further in Defense. The second memorandum sets forth our comments and views regarding the tentative JCS requirements.8 I would suggest that you do not discuss our views with the Service attachés even if by some remote chance they should get copies of the Defense papers that were sent to the State Department and show them to you. If they do get copies of the Defense papers I would go slow in discussing the matter with them because I can conceive that the situation could become very complicated if there are interdepartmental discussion and communications at both ends of the telegraph line!*

[Page 1796]

We are waiting now for the more detailed information from Defense which is mentioned in our first memorandum. I expect that Doc Matthews will decide to speak with the JCS shortly on the basis of our two papers which have gone to him.

Present plans call for Ambassador MacVeagh to remain in Lisbon until after the NATO meeting there. He will then return here for consultation before proceeding to Madrid. Therefore, one might guess that he would not be in Madrid much before the first half of March.9 This is right off the top of the head, but it would seem to me that it will take about that long anyway before all plans for the negotiations are completed, final approval given, the British and French informed and the military representatives sent off for the negotiations. It may very well be that it will take longer before agreement is reached regarding these plans and the stage is set. In any case, I would not imagine that military negotiations will begin before Ambassador MacVeagh arrives.

You will appreciate the extent to which I have consulted the crystal ball in sending the foregoing information. Don’t hold me to it too closely. I will keep you informed, however, how things are going. Although it goes without saying, I will say it anyway—don’t hesitate to write about anything that isn’t clear. And let us have the benefit of your ideas. I can’t guarantee, of course, that they will (a) arrive in time to be actively considered, or (b) be accepted, but of course you know what the process of “policy formulation” entails at this end.

With best regards,

Sincerely yours,

  1. Document 833.
  2. For a summary of Sufrin’s estimate, contained in his report of Dec. 20, 1951, see Document 831.
  3. These “details” were contained in a letter of Mar. 4, from Secretary of Defense Lovett to the Secretary of State. (752.5/3–452)
  4. Not found attached to the source text. A copy of this memorandum, dated Jan. 15, is in DMS files, lot W–1425, “Spain”.
  5. The text of the Economic Cooperation Agreement between the United States and Yugoslavia is in 3 UST (pt. 1) 1.
  6. Document 834.
  7. See footnote 2, ibid.
  8. Supra .
  9. We did not mention in our telegram today that we were sending you the information you requested in your telegram #808, January 29, in view of the suggestion contained in this letter regarding discussions with the Service attachés there. [Footnote in the source text. Telegram 627 to Madrid reported that the JCS recommendations were then in the Department of State. (711.56352/1–2952) Telegram 808 from Madrid requested that the recommendations be sent promptly to the Embassy. (711.56352/1–2952)]
  10. Mr. Perkins has recommended that Mr. Matthews follow this up with the JCS as a matter of urgency. [Footnote in the source text.]
  11. Ambassador MacVeagh arrived in Madrid on Mar. 23, and presented his credentials to the Spanish Government on Mar. 27.